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More home foreclosures predicted

Professor forewarns of round two

Posted: February 18, 2009 12:48 a.m.
Updated: February 18, 2009 4:55 a.m.
Political studies professor John Stead speaks at luncheon. Political studies professor John Stead speaks at luncheon.
Political studies professor John Stead speaks at luncheon.

Homeowners should brace for another wave of foreclosures this spring, said The Master's College political studies professor John Stead.

Round two of foreclosures will affect those people who qualified for variable interest-rate loans and planned to refinance at a fixed interest rate into a 30-year loan, Stead told the Santa Clarita Valley Republican Women's group Tuesday at a monthly luncheon. The variable rate usually lasts five years, he added.

"In order to refinance, you have to have equity, but with the decline of 20 to 25 percent of home equity, those people cannot refinance," said Stead, whose analysis was based on his own research and a recent L.A. Times op-ed piece. "Their rates will be higher and higher, and they will go through a second round (of foreclosures) unless the government in working with banks refigures loans in terms of lower rates at more years."

Stead's comment surprised Lynn Parkinson, president of the group.

"It's a discouraging turn of events when we thought it was over with and that we were headed to a better place," Parkinson said. "I had no idea that we were headed toward another really serious boondoggle with the foreclosures."

Stead also gave a historical analysis reaching back to the Eisenhower and Reagan eras to explain how the U.S. experienced years of economic growth before the crisis it is in now.

Low taxes and a monetary policy that linked the money supply to growth and gross domestic product avoided inflation, Stead said.

It was a concept Ronald Reagan understood well and, "even through the Clinton Years that policy was not really done away with," Stead said.

Group Vice President Becca Keating said Stead's analysis was simple.

"Economically, it made complete sense," Keating said. "That whole equation ... you take the weight, taxation off business, which allows them to grow, expand ... and when you saddle them with higher taxes, higher regulation, you strangle the very heart of what they're looking for when it comes to taxation. It was very logically sound and economically makes sense if you're a capitalist."

The more revenue businesses can generate, the more tax comes in for the government so it can balance a budget, she said.

"If you do the reverse, you strangle job development, innovation, entrepreneurship," she said.
Santa Clarita Republican Women meet the third Tuesday of each month.

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